Parliament panel slams changes in pension calculation criteria

A Parliamentary panel has rapped the government for abruptly amending the formula for calculating pension, which resulted in "substantial" decrease in the amount of benefits received by employees who retire after September 1, 2014, saying it amounts to "breach of contract".

The report said the government had contended that the amendment was made on the basis of recommendation in the actuarial valuation reports of the Employees Pension Scheme with a view to curtailing deficit in the Employees’ Pension Scheme Fund.(Reuters)

A Parliamentary panel has rapped the government for abruptly amending the formula for calculating pension, which resulted in “substantial” decrease in the amount of benefits received by employees who retire after September 1, 2014, saying it amounts to “breach of contract”.

The Committee on Subordinate Legislation has said in its 12th report that the amendment is “adversarial and arbitrary in nature” as the persons who retire up to one day before September 1, 2014 will get higher pension on account of calculation based on 12 month average salary, while those who retire after that will get substantially lower pension calculated on 60 months’ average salary.

At the time of joining the pension scheme both categories of employees were entitled to receiving pension based on the same formula, the report tabled in the monsoon session said.

The Committee has now “strongly” recommended restoration of the earlier formula in case of “at least all such employees who became members of Employees Pension Scheme prior to the August 22, 2014 notification effective from September 1, 2014”.

“The criteria of 60 months for calculation of pension, could be made applicable to only those employees who had joined Employees Pension Scheme after the notification after suitable modifications as the committee find little justification for such a drastic change in the criteria,” the panel said.

The report said the government had contended that the amendment was made on the basis of recommendation in the actuarial valuation reports of the Employees Pension Scheme with a view to curtailing deficit in the Employees’ Pension Scheme Fund.

“Having considered the background and the aims and objects of the Employees Provident Fund and Miscellaneous Provisions Act, 1952, the Committee are of the considered view that the extant amendment made by the government towards calculation of the pension is totally against the principles of natural justice and contrary to the spirit of the original Pension Scheme.

“It is definitely prejudicial to the interests of those employees who are attaining the age of superannuation after 1 September, 2014. The amendment is adversarial and arbitrary in nature,” the committee observed.